Correlation Between GRIN and CLO

Can any of the company-specific risk be diversified away by investing in both GRIN and CLO at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GRIN and CLO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GRIN and CLO, you can compare the effects of market volatilities on GRIN and CLO and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GRIN with a short position of CLO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GRIN and CLO.

Diversification Opportunities for GRIN and CLO

-0.18

Correlation Coefficient

GRIN  CLO

Good diversification

The 3 months correlation between GRIN and CLO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding GRIN and CLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLO and GRIN is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GRIN are associated (or correlated) with CLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLO has no effect on the direction of GRIN i.e., GRIN and CLO go up and down completely randomly.

Pair Corralation between GRIN and CLO

Assuming the 90 days trading horizon GRIN is expected to generate 326.45 times less return on investment than CLO. But when comparing it to its historical volatility, GRIN is 39.89 times less risky than CLO. It trades about 0.03 of its potential returns per unit of risk. CLO is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  0.07  in CLO on August 25, 2024 and sell it today you would lose (0.05) from holding CLO or give up 73.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GRIN  vs.  CLO

GRIN

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GRIN are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, GRIN may actually be approaching a critical reversion point that can send shares even higher in December 2024.

CLO

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CLO are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CLO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GRIN and CLO

The main advantage of trading using opposite GRIN and CLO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GRIN position performs unexpectedly, CLO can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CLO will offset losses from the drop in CLO's long position.

The idea behind GRIN and CLO pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.